Sterling drops as the BOE says it may increase Quantitative Easing in the future

The British pound fell sharply against the greenback and the Euro on Wednesday after Governor of the bank of England Mervyn King said that he hasn’t ruled out pumping more money into the economy and stated the benefits of a weak pound. The governor’s speech came after the release of the bank's quarterly Inflation Report, which announced that UK consumer prices will be below its 2 percent target in two years.
Remarks by Mervin King that a weaker pound would help rebalancing growth towards exports and that UK growth was unlikely to return to pre crisis levels for "a considerable period" also weighed on the Sterling. The pound tumbled by more than a cent against the greenback after King's comments. Later it hit a session low of $1.6553. The GBP/USD is currently trading at $1.6550 as of 19:38pm, GMT with a bearish trend.

The greenback may continue falling after Federal Reserve speakers delivered “dovish” statements, indicating they are concerned that unemployment will continue rising. “Any effort to stabilize the dollar in the short term can only come from the Fed via verbal intervention, threatening to hike interest rates early if required,” BNP Paribas analysts led by Hans-Guenter Redeker in London wrote in a research note today. Yesterday’s speeches indicated that “Friday’s release of the weak October labor-market report impacted Fed thinking.” U.S. economic growth and inflation may persist below ideal levels into 2011, making the central bank’s current interest rate stance “appropriate,” Federal Reserve Bank of Dallas President Richard Fisher said in a speech yesterday in Austin, Texas. The EUR/USD is currently trading at $1.4970 as of 20:37pm, GMT with a bullish trend.

Canada’s dollar against the greenback after reports in China showed that industrial Production rose to 16.1% from an expected 15.3%, leading to global growth contrary to most analysts expectations for the near future thus spurring equities and commodity gains. “It looks to be a risk-on sort of environment, with the Chinese data mainly positive overnight and gold and equities up,” said Shaun Osborne, chief currency strategist in Toronto at Toronto-Dominion Bank, Canada’s second-largest bank. The Chinese trade surplus almost doubled to $24 billion, as the slide in exports eased to the slowest pace this year. Raw materials such as crude oil and precious metals account for more than half of Canada’s export revenue. The USD/CAD is currently trading at 1.0465 as of 20:46pm, GMT with a bearish trend.

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